Gates Sr.: Time is now for income tax on rich

Bill Gates Sr. is a big presence in Washington state – both literally and figuratively.

The six-foot-six inch lawyer, philanthropist and father of Microsoft co-founder Bill Gates on Wednesday formally unveiled Initiative 1077, a campaign for a state income tax on the wealthy. Gates has long said that Washington’s income tax is unfair to businesses and middle and low-income people.

“Our tax code … harms our economy and fails to provide the stable revenue we need,” Gates Sr. said at a news conference. “Our state government faces an endless rollercoaster of booms and then bust cycles that have a terribly undermining effect on our ability to provide services.”

Organizers will need to collect more than 240,000 valid petition signatures by July 2 to qualify Initiative 1077 for the November ballot.

I-1077 would tax couples with adjusted gross incomes greater than $400,000 annually, or incomes of more than $200,000 for individuals. Supporters say that represents the top 3 percent of earners in Washington. It also would cut the state property tax by 20 percent and increase the business-and-occupation tax credit to $4,800. The proposed initiative sets out two tax brackets. The first tax rate would be 5 percent of the portion of joint income that exceeds $400,000, or $200,000 for individuals. The tax would increase to 9 percent on the portion of income that exceeds $1 million for couples or $500,000 for individuals.

Gates Sr., who chaired a panel that wrote a 2002 report on tax alternatives for the state Legislature, said this initiative would bring in about $1 billion per year for education and health programs.

A recent study by the Washington, D.C.-based Institute for Taxation and Economic Policy found that Washington state had the most regressive tax system in the country, largely because of the state’s reliance on sales tax. People earning less than $20,000 annually pay 17.3 percent of family income toward sales and excise taxes and property taxes, the report said; people in the top 1 percent of earners – those making more than $537,000 a year – pay 2.9 percent.

Income tax measures have been attempted over the years in Washington with little success (Click here for a history). A graduated income tax was enacted by initiative in 1932, passing with about 70 percent of the vote. But it was thrown out by the state Supreme Court, which pointed to the state constitution’s call for uniform taxation on property. Voters have defeated subsequent attempts to amend the constitution for a state income tax, most recently in 1973.

Since then, some legal experts have said a modern court might overturn the 1933 court decision that defeated the original income tax, arguing that the old decision is based on obsolete legal theory. Gates Sr. said he, too, thought an income tax would be upheld. “The cases on which that (1933) decision was based have been overruled,” he said.

Anti-tax initiative guru Tim Eyman attended Wednesday’s news conference. He opposes I-1077, saying an income tax was “the Holy Grail” of progressive politics. Despite language in the measure that says voters would have to approve applying an income tax to people who make less than $200,000 annually or $400,000 for couples, Eyman noted that the Legislature can change an initiative after two years.

“I just don’t think the voters are going to go for it. I think at the end of the day it’s an enormous leap of faith to think that this is actually going to go to what they say it’s going to go to because initiatives can be changed after two years.”

Gates Sr. said he expected a tough fight. “It will probably be up there with the more expensive campaigns in the state.” Washington is one seven states without a tax on income.

“Where do you go? There’s an income taxes practically everywhere,” Gates Sr. said. “You could go to Alaska, I guess…Nobody’s had the courage to step up to say, ‘We need an income tax.’ I would predict this won’t cause some tidal wave of departures.”